Dairy Crest guides higher on full-year profits and cost savings

6th Feb 2014 08:20

Dairy Crest has guided higher for full-year profits as cost savings and profits from disposals ran ahead of expectations. As some analysts had been pointing out, the company was focused on 'self-help': cutting costs, disposing of properties and investing in new products and upgrading production facilities. Trading during the third quarter of its financial year was described as in line with management expectations, despite the "challenging" environment. However, it is on track to deliver cost savings in its Dairies business ahead of its annual target of £20m. The company also reiterated its medium-term target for 3% Dairies margins.In parallel, Dairy Crest announced that it had agreed the sale of its Nine Elms milk depot near Battersea Park in London for £17.6m in cash. That is expected to generate a profit of £15m, versus a forecast gain of £8m for the entire year.As a result, profits from the sale of properties are expected to total around £18m for the entire year, £10m ahead of previous expectations, and result in around £2.5m extra bonus payments for employees. Nonetheless, the company had previously disclosed that the sale of the facility near Battersea was particularly profitable and likely to generate a spike in profits. "Residential milk deliveries have steadily declined over recent years as supermarkets have grown their share of the market," the comapny explained. Lastly, however, the challenging Spreads market was seen leading to full-year profits below previous expectations in that segment.  At 508p as of 10:26 on Thursday, shares of the £694m-market cap FTSE 250 listed firm were down by approximately 6% year-to-date after a gain of 41% over the course of 2013.AB